Maryland is slated to become the 1st state to pass a law banning “price gouging” by generic pharmaceutical manufacturers. The bill was passed by the Maryland general assembly in April and last month the governor said he would allow the bill to become law without his signature.

The bill, which becomes effective on Oct. 1, prohibits generic drug manufacturers and distributors from price gouging in the sale of “an essential off-patent or generic drug”. The law defines price gouging as an “unconscionable increase” or an increase that is “excessive and not justified” by the manufacturing costs associated with expanding access to the drug.

It also includes price increases that result in patients having “no meaningful choice” whether or not to purchase the drug due to insufficient competition in the market.

The bill includes an exemption for wholesale distributors when the price increase is directly linked to additional costs brought on by the manufacturer.

If the wholesale acquisition cost of a prescription drug jumps by at least 50% compared to the previous year, the bill authorizes the Maryland Medical Assistance Program to notify the Maryland attorney general. At that time, the drug manufacturer must justify the price increase within 45 days and the attorney general can seek a court order compelling document disclosure.

In his letter to the speaker of the house, Governor Larry Hogan said that his chief counsel has raised “legal and constitutional concerns” about the bill that were also echoed by generic drug manufacturers in the Association for Accessible Medicines.

The governor pointed out that the law only deals with generic drugs, leaving patented drugs and drug delivery systems, like the EpiPen, untouched. He added that the bill may violate the 14th Amendment’s due process clause due to its vague terms like “unconscionable increase” and “excessive”.